NORD/LB Annual Review 2017

Bespoke tailors for our customers

Annual Review 2017 Editorial / 01

Who we are, what drives us Editorial

2 400 corporate customers As a commercial bank, NORD/LB provides an attractive and comprehensive offering of financial services to private, corporate and institutional customers as well as to the public sector, 240 000 in Northern Germany and well beyond this core region. For current accounts in the Braunschweig region example, NORD/LB participates in the structured financing of Thomas S. Bürkle international projects, particularly in the areas of energy, infra- Chairman of the Managing structure, shipping, aircraft and real estate. Board of NORD/LB, Hanover

5 000 2017 was a ground-breaking year for NORD/LB. First of all, we managed to turn a profit properties financed again, in spite of risk provisioning in ship financing still being exceptionally high. Second- Contents ly, we succeeded in noticeably raising our capital ratios. Thirdly, we were able to scale back our ship finance portfolio much more quickly than we originally planned. And fourthly, 02 Bespoke tailors for our customers we merged Bremer Landesbank with NORD/LB in record time – the first key step in our 535 17 What makes us who we are transformation programme entitled “ONE BANK”, with which we want to streamline and aircraft financed 37 What the figures say strengthen the entire Group.

Even though NORD/LB is changing, we are holding strong to the areas of business that make up our bank. With this Annual Review we would like to give you some insight into 1 115 the diversity and strengths of the bank and its business segments. The examples show ships financed that we always focus on our customers. We always seek the best solutions for our customers. And that is exactly what we want to be: bespoke tailors for our customers. Give us an opportunity to serve you too! >70 savings banks in the savings bank network Kind regards,

6 450 Thomas S. Bürkle employees Chairman of the Managing Board NORD/LB Norddeutsche Landesbank Represented in important financial and trade centres worldwide

Ownership structure / Headquarters / Ownership regions Network

Headquarters Strong support from our owners // Hanover // Braunschweig // Magdeburg Special Purpose Holding Branches worldwide Saxony-Anhalt Savings Association of the // London // New York // Singapore // Shanghai Banks Holding Association Mecklenburg-Western 5,28 % Pomerania Savings Banks 3,66 % German branches // Bremen // Dusseldorf // Hamburg // Munich // Oldenburg // Schwerin // Stuttgart and approx. Lower Saxony State of Lower Saxony 100 branches of Braunschweigische Landes- Savings Banks and 59,13 % Giro Association sparkasse 26,36 % Subsidiaries and bank holdings State of Saxony-Anhalt // Deutsche Hypothekenbank 5,57 % // NORD/LB Luxembourg Covered Bond Bank

Schwerin Bremen Hamburg Amsterdam Oldenburg Headquarters and ownership regions Hanover // Hanover Dusseldorf Braunschweig New York London Magdeburg // Braunschweig // Magdeburg Luxembourg Frankfurt Hanover Nuremberg Braunschweig Paris Stuttgart Magdeburg Munich

Shanghai

Singapore 02 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 03

»More efficiency for even greater customer focus« The best of both worlds

The “ONE BANK” transformation programme Are there any success stories to report yet? A complex, group-wide programme like “ONE BANK” is based on strategic goals and measures. has been a priority at NORD/LB since 2017. Yet it can only be successful on a practical level. How does “ONE BANK” affect day-to-day work? Can you briefly outline what it’s all about? Matthias Hellmann / The full integration of Two colleagues from Corporate Sales talk about what has changed following the merger with Bremer Landesbank is a key milestone. Bremer Landesbank (BLB). Matthias Hellmann / Through “ONE BANK” Questions about the future of our subsidiar- we are strengthening NORD/LB for future ies Deutsche Hypo and Asset Management No overlaps “Instead of carrying out the same tasks “After more than 25 years in Bremen I challenges. We aim to make annual savings have been cleared up: Deutsche Hypo will The efficiency concept runs at different places, following the integration moved to Hanover at the beginning of 2018. right through the “ONE BANK” of € 200 million by 2020, and sustainably remain part of the Group, while we have transformation programme. of BLB we have redistributed competencies The team welcomed me very positively and reinforce our capital and earnings base. attracted a new strategic partner for Asset As described here by Hendrik and responsibilities. In our capital markets openly. Given the size and complexity of the Müller and Bernd Hansen, To this end we are working on three key Management. On top of this we have numer- division, which deals with corporate and international business in Hanover, I already many areas and initiatives are action areas: What is the best structure for ous individual working-level projects, all currently working on eliminat- special finance customers, this means see a difference in culture. Business in the Group? How can we set up our operating contributing to the big picture. For example, ing redundant processes, cre- almost every team has colleagues from Bremen was more fragmented, with shorter ating synergies, and redesign- model efficiently? To what extent can we we are optimising credit processes, simplify- ing NORD/LB business activi- Bremen and Hanover in it. This facilitates paths and sometimes unconventional solu- make further improvements to our business ing our IT architecture and reorganising, ties to avoid any overlaps. an exciting transfer of know-how that can tions too. I can learn a lot here and I am model? where appropriate: our business segments, only make us stronger. We engage in an also looking forward to inputting ideas and such as in the corporate customer segment intensive exchange of ideas and informa- approaches from my own experience.” or in the savings bank network. tion to capitalise on the best from both / Bernd Hansen, worlds.” / Hendrik Müller, Sales CRE / Structured Finance And what do customers notice from these Head of Sales CRE / Structured Finance internal changes?

Matthias Hellmann / First and foremost, “ONE BANK” should ultimately be positive for them. Our new structures ensure more efficiency for an even greater customer focus. Thanks to our leaner and increasingly digital processes, in future they will benefit from shorter processing times and faster decision making.

Matthias Hellmann is in charge of Corporate Hendrik Müller (left) and Communications at NORD/LB, and heads up Bernd Hansen are colleagues “ONE BANK” together with Olof Seidel. in the capital markets division. 04 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 05

»Getting to know people personally is important to me«

A day at work with Brit Meyer, our “bespoke tailor”

At NORD/LB in Magdeburg, Brit Meyer is responsible for the syndication of large-volume financing 11:30 am: An investor in a different transac- 3:00 pm: Getting to know people personally in the housing sector. She is in contact with professional commercial real-estate investors like insu- tion gets in touch: the project has gone down is important to me. With new clients, for me rance companies and banks that want to get involved in broadly-diversified loan portfolios. She well with them internally, now we need to this primarily means listening closely: what always aims to ensure an optimal match between transactions and investors. In 2017 this led to an focus on the formalities. He first asks me to are their wishes and specifications with Brit Meyer excellent syndication loan volume of roughly € 100 million. draft the syndicate agreement. Since every regard to volume, collateral and return, for from Asset Distribution in Magdeburg combines long- investor has their own rules and require- example? Deep knowledge, commitment standing experience with ments, these contracts are always prepared and trust are an absolute must in my job, professional know-how: she 8:00 am: Today starts with a know-how 9:30 am: Back at my desk, I call the potential individually. My colleagues at Credit and because structuring finance is not just a trained at NORD/LB and has now been working here for exchange with customer service colleagues. investor. We have worked together for many Collateral Management are responsible for long process often lasting many months, it over 25 years. Throughout They have acquired a large financing deal to years, just like with most of my clients. this, I pay them a short visit in order to also requires tailoring. This gives the offers her career she has gained experience across a vast buy residential property, which now has to I briefly outline the transaction for him, and discuss the details of the deal. a certain quality, which my clients value and range of the housing sector. be syndicated to find a tailor-made solution my instinct was right: A stake in an acquisi- reward with strong loyalty. The meeting was for the customer. Simultaneously we have tion finance at the rim of the city perfectly 1:30 pm: After lunch I see that my client has good and detailed – I look forward to wor- to find a partner for the loan. Together we fits in his portfolio. I send an email with a already returned the non-disclosure agree- king with them in the future. Hopefully, I discuss the details. I scroll through the non-disclosure agreement, and also put ment. He receives the term sheet and can can offer them a special project, together “investor file” in my head, and already have together the term sheet with the key figures. present the project at his company. Then I with the customer advisor, soon. an idea of who could be suitable for this have to prepare for an afternoon meeting. I transaction, the perfect match. am visiting an investor that I briefly met for the first time at a real estate trade fair. Apart from our loan portfolio I also introduce our product range and services as well as our analytical principles. 06 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 07

Out in front down under

As one of the leading banks in the field of renewable energies, we continue to expand our portfolio around the globe. We thus offer German clients and investors an opportunity to harness the potential of new, attractive markets – on the other side of the world for example: in 2017 we financed our largest solar power project to date in Australia.

Solar power for up to 87 000 Australian households

NORD/LB with its long-standing expertise in These will be constructed and operated by renewable energies has been involved in German investor Wirsol and Australian pro- international solar energy projects for over ject developer for renewable energies Edify ten years. In 2017 we expanded our portfolio Energy. Two of the solar farms are being con- with a trendsetting transaction in what is structed in the state of Queensland, while still a young market for us: Australia. the third will be built in the state of Victoria NORD/LB financed an onshore wind farm in 2017 on the site of a former open-pit mine near in Australia’s south-east. The 198 Megawatt Leipzig. 20 000 households can be supplied Together with the Clean Energy Finance Peak (MWp) capacity of the three solar farms with the power generated there each year. Corporation and the Commonwealth Bank combined is enough to supply up to 87 000 of Australia, we are providing debt capital households with electricity from 2018. totalling 231 million Australian dollars (AUD) for three solar farms. Wind of change blowing in Saxony-Anhalt

Lignite mining then, wind power now: What is special about the transaction is in Saxony-Anhalt, NORD/LB is pushing that it combines a classical financing struc- ahead with Germany’s energy transforma- ture with a placement instrument. Part of More information on our tion. The blades of nine wind turbines have the financing was placed with an investor. Energy and Infrastructure customers on p. 48/49. been turning since the end of 2017 on the This special solution was developed by the site of a recultivated open-pit mine, with a NORD/LB team in Hanover. From the lend- total capacity of 28.8 megawatts. The on- er's perspective, a continuous and stable shore Hohenmölsen-Profen wind farm is dividend can be expected for the owners the first joint wind energy project between over the entire financing term. NORD/LB and GETEC Green Energy AG. The company offers solutions ensuring the economically and ecologically viable generation of energy from wind and solar power NORD/LB accompanies German solar farm project developer Wirsol to Australia with as well as the recycling of biomass. financing for three solar farms. 08 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 09

Promising investment

Many cities in Germany are growing – this means demand for housing is correspondingly high in Tailored promissory notes Broad investor base many places. In the capital city of Saxony-Anhalt, the Magdeburg housing association (Wobau) and NORD/LB are together treading new paths in real estate financing. Wobau needed a solution other than For Wobau we put together a broad spec- traditional loans for the substantial financ- trum of investors this way: private investors Something’s happening in the centre of Magdeburg: in the immediate vicinity of the ing – and found the perfect partner for this were primarily attracted by the promissory Dom (cathedral), the construction of the “Domviertel” (Cathedral Quarter) began in 2017, in NORD/LB. The idea was to shape the notes with terms of seven and ten years. The named after the city’s landmark. This district in an excellent location is to be completed financing requirement in a very flexible promissory notes with longer terms of 14 by the end of 2020. State-owned Wobau, the largest housing association in Saxony-Anhalt, manner using a capital market product. and 18 years were also appealing to Institu- is to invest € 70 million in the project, combining new-builds and the modernisation of tional investors. That this was an attractive existing real estate. Together with Stadtsparkasse Magdeburg capital investment, especially in times of we arranged a promissory note accordingly. low interest, was also demonstrated by the We successfully placed this into the market, high demand that clearly outstripped the In the heart of Magdeburg, Wobau Magdeburg is creating the new Cathedral Quarter. The capital and largely within the savings banks net- supply of promissory notes. requirement of € 70 million was covered with work as well. a promissory loan – arranged by NORD/LB. Dirk Moschner is one of our contact partners for housing association and supports the project.

Agricultural Banking

Within our Agricultural Banking segment we support our customers in meeting their special challenges with our distinct expertise. In 2017 a customer from Meck- lenburg-Western Pommerania, we have a long-standing relationship to, asked us to support him with a take-over transaction of another company. We structured and Further case studies, refer- financed the complex deal. One part of ences and information on the financing had to be redeemed by the Agricultural Banking at profit from the sale of the farmland former NORD/LB online at www. nordlb.com/corporate-custom- owned by the merged company. ers/agricultural-banking/ 10 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 11

SME driving force

By developing and structuring a major investment programme for refinancing, NORD/LB convinced Hamburg Airport.

Ready for take-off

With a broad range of instruments, NORD/LB provides for future-oriented financial concepts Hamburg Airport is getting itself ready for the future: a comprehensive investment for the German SME sector. programme began in 2017, in which Germany’s fifth-largest airport is set to undergo some significant expansion. NORD/LB was and is heavily involved in developing and structuring the funding. In spite of the challenging conditions and the tough competition on the The German SME sector is a broad area: Companies of various sizes, ranging from ten to ten thou- market we prevailed with our “all-in-one” package of experience, know-how, strategy and sand employees in various sectors, from automotive suppliers to dental technology firms, want to product range. prevail in their markets and secure long-term success. This requires intelligent and above all custom strategies – both business and financial. So SMEs need a bank that speaks their language, one that The funding is mainly based on promissory notes and registered bonds amounting to € 60 does not act by routine, but specific to given industries. million. Both were placed primarily at savings banks, cooperatives (Volksbanks/Raiffeisen- banks) and insurance companies, and enjoyed very high demand. This enabled us to mark- Measured financing concepts edly broaden the circle of investors at Flughafen Hamburg GmbH – a “blueprint” for future transactions. NORD/LB is an SME bank by tradition and It makes no difference whether it is issued conviction. With an experienced team, first- products, hedging currency and interest class product portfolio and a strong knowl- risks, leasing products or optimising work- Flexible and efficient edge network we support our customers in ing capital: our broad spectrum of financing realising their goals. We weigh up the oppor- instruments and solutions means we, as the NORD/LB is helping a listed SME in the automotive supply industry lighten its balance sheet tunities and risks together and prudently driving force behind SMEs, provide enough to the maximum extent possible by selling as many receivables as possible. To this end we draw up a forward-looking financing con- momentum for our clients to hit the ground developed a programme in 2017 to sell receivables, which offers great flexibility with regard cept. The focus is always on ensuring an running. to jurisdictions, payment terms for receivables and the breakdown of debtors. optimal capital structure, so the company remains financially strong and liquid on a We structured two sub-portfolios to make the sale of receivables efficient for clients. They An innovative solution for sustainable basis. This leaves customers selling receivables creates a limit the maximum volume of receivables that can be purchased to € 50 million. The port- optimally situated to concentrate fully on win-win situation for the auto- folio was also optimised with an insurance solution. This minimises the risks for NORD/LB motive supply customer as their core business. well as for NORD/LB. and thus also the price for clients. 12 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 13

Backing our clients for the long run

NORD/LB has not only set a sustainable course for its own business activity, it also primarily helps clients shape their business operations in line with the environment, climate, people and society.

Leading position on European core markets

Renewable energies are a priority area of The focus in this respect is placed on gener- our business – and this segment is increas- ating energy from wind and solar power. To 29 % ingly growing in importance. Through our Project financing in these two areas now involvement we have significantly broad- accounts for more than 50 per cent in our the wind energy segment ened our experience and expertise over the “Energy & Infrastructure” business seg- expanded from 2013 until With a large-volume 2017 (proportional share of the last five years. Today NORD/LB is one of the ment. project funding, NORD/LB entire business) leading financiers in the core European supports the construction of an onshore wind farm in markets of Germany, France, Ireland and the By facilitating investments in generation Sweden with wind turbines United Kingdom. We are expanding our cus- plants worldwide, we contribute to the from Lower Saxony. tomer base in markets that are still new for expansion of renewable energies overall. We us, such as North America and Asia. also provide targeted assistance for our customers in implementing efficiency measures directly at their locations. NORD/LB funds largest project financing amounting to € 500 onshore wind farm in Europe million. This was put together among oth- ers by NORD/LB along with the European 179 wind turbines, 650 megawatts, € 800 Investment Bank (EIB) and KfW IPEX. Focus on wind and solar: industry split in energy customer segment million investment volume: these three fig- as at 31 December 2017 Exposure at Default: € 11,9 billion ures alone demonstrate that “Markbygden” “Markbygden” has been under construction Additional information on in northern Sweden is a huge project – the since the summer of 2017, and the wind our customers and products online at www.nordlb.com/ largest onshore wind farm in Europe, to be farm is set to reach full capacity in 2019. nordlb/sustainability/ precise. And NORD/LB is the mandated lead This means there will also be a bit of Lower customers/ arranger. Our leading role in structuring Saxony in the Swedish power generation:

Other energy 23 % this large project financing transaction in the 179 wind turbines delivered by Sweden serves to once again underline our GE Renewable Energy are also manufac- global competence in the field of renewable tured amongst other places in the town of Wind onshore 58 % Gas/biogas 7 % energies. Salzbergen in Lower Saxony.

Solar energy 12 % Alongside the investments of project spon- sors General Electric (GE), Green Investment Group (member of Macquarie Group), the funding of the wind farm was secured with 14 / What drives us // Bespoke tailors for our customers What drives us // Bespoke tailors for our customers / 15

Maritime all-rounder

NORD/LB can look back on a long history in ship financing. We still feel the same connec- After a very difficult year for shipping in 2016, we observed a modest recovery and stability across € 12.1 tion to this segment, and despite all the challenges we see this as a promising business field max all sectors in 2017. These are good conditions for both priorities in the Maritime Industries seg- billion with good earnings opportunities. We have carried out the necessary alterations in our ship- ment: for reducing the size of the portfolio and for new business. ping portfolio so consistently that the downsizing goals set for the end of 2018 were € 5 was the size of the shipping achieved one year early. loan portfolio at the end of billion 2017. This means we reached New business: global approach – Portfolio reduction: our downsizing objective of The successful downsizing of the portfolio plays a key role here. At the same time we are Non Performing Loans broad diversification objective reached early € 12 to 14 billion by the end of (NPLs) pushing forward very carefully with new business in selected sectors, such as financing 2018 a year early. cruise ships, ferries and special-purpose vessels. In this context we pursue a holistic “With regard to shipping we are working Within the new business unit Shipping Port- approach because we offer much more than just ship financing. Our clients benefit from consistently on developing a conservative folio Optimisation we actively transform the outstanding expertise – in niche segments too –, from our international operations in loca- portfolio, one that is very diverse both geo- bank's shipping portfolio. In 2017, we were 985 tions such as Singapore and New York, from a strong network, and from our broad range of graphically and with regard to the types of able to reduce gross NPL exposure by fewer ships in the portfolio: services that has been expanded further with the integration of Bremer Landesbank. ships. We achieve this through targeted new approx. € 4 billion. Our aim is to having fur- Since 2009 we have almost business activities, such as with financing ther reduced the NPL exposure to € 5 billion halved the numbers from 2 100 to 1 115 by the end of 2017. By purposefully pooling strengths and competencies within the bank we can even provide that offers first-class risk structures in the by the end of 2019. / Aaron Sen, Head of Ship all-round support for our clients with complex issues. From the start of 2018 we are also segments of cruise ships and ferries. Geo- Asset Management underlining this added value with the name of the business division in question: “Ship graphically we focus on the Asian market Finance” has become “Maritime Industries”. with its strong demand; more than one third of our new business planned for 2018 will be acquired there.” / Tobias Zehnter, Head of Ship Financing

Despite all challenges, ship financing is a sustainable segment with good earnings potential for NORD/LB.

Tobias Zehnter (left) and Aaron Sen are working in the shipping business. 16 / What drives us // Bespoke tailors for our customers / 17

2017 – a ground-breaking year for NORD/LB

Thomas S. Bürkle Chairman of the Managing Board of NORD/LB, Hanover

“We fully achieved our four most important targets for 2017. The bank is profitable again and we managed to raise all of our capital ratios. Furthermore we reduced our shipping loan portfolio much faster than originally planned. And last, not least we took the first step for the realignment of NORD/LB by the full integration of Bremer Landesbank.”

“With our decisions not to sell Deutsche Hypo and finding Warburg bank as a new partner for NORD/LB Asset Management we moved our way further towards creating NORD/LB’s new Group structure. Synergy effects from the merger with Bremer Landesbank also pro- gressed well.”

“Concerning the further reduction of the shipping loan portfolio we will now focus on the non-performing loans (NPLs). Our target here is to reduce the NPLs from € 8.2 billion today to below € 5 billion by the end of 2019. We will continue to improve the asset quality of the total portfolio by selective and risk-adverse new business. We will also continue to improve our capital ratios, as regulatory requirements for bank capital might rise in future.” What makes us who we are / Thomas S. Bürkle, Chairman of the Managing Board of NORD/LB, Hanover // How we earn our money – p. 18 // How we run our bank – p. 22 // How we prepare our bank for the future – p. 25 // How we conduct our business – p. 28 // How we align economic success and corporate responsibility – p. 30 // Who makes our bank successful – p. 34 18 / What makes us who we are // How we earn our money What makes us who we are // How we earn our money / 19

How we earn our money

NORD/LB: the leading universal bank in the north Priorities for NORD/LB: // Supporting and advising private and commercial customers in all finance issues // We are a commercial bank. // Tailored financing in the corporate customer business and in agricultural banking // Financing solutions in the shipping and We offer a wide range of financial services to our private, corporate and institutional cus- aircraft segments tomers as to our public-sector clients. In terms of structured financing we are active in the // Project financing in the fields of renewable energies and infrastructure fields of shipping and aircraft financing, while in the areas of energy, infrastructure, indus- // Commercial real estate financing, try and real estate we are involved in international projects at selected locations. including social housing // Traditional banking products as well as interest and currency hedges // We are a regional bank. // Debt capital issues on the capital market // Transformation of credit risks in investment products and asset management services for In our capacity as a regional bank we are the local bank for the federal states of Lower institutional investors Saxony and Saxony-Anhalt. For these states we carry out banking transactions, offer advice, // Comprehensive and tailored range of money and support measures to promote the economy. and capital-market products

Stability and quality – our success factors // We are a central bank for the savings banks. We carry out NORD/LB business with a steady hand and a cool head. The best example is In Lower Saxony, Saxony-Anhalt and Mecklenburg-Western Pomerania we take on the 79 % our conservative risk policy: Our risk provisioning policy is far-sighted, we treat any and all role of a central bank for the savings banks. In addition, as part of the “extended network” This is the share of the “very (credit) risks responsibly, and provide finance only according to strict guidelines. This gives we cooperate with savings banks in Schleswig-Holstein and Brandenburg. In our clearing good/good” rating category in us a solid position, as confirmed by our stress test results as well. the valuation of all our loans. house role we offer all the services that are relevant for our savings banks. Another factor of success is the broad diversification of our business model. By conducting activities across many markets and customer groups we broaden our business options and // We are a promotional bank. diversify the risk. This benefits not only ourselves, but also and primarily our customers. The NORD/LB portfolio is spread evenly between our core areas of business. Apart from the

As part of the promotional lending business, Investitionsbank Sachsen-Anhalt and Landes- More information on our challenging shipping segment, all of our business areas are profitable, which represents förderinstitut Mecklenburg-Vorpommern – both belonging to the NORD/LB Group – advise success factors from p. 25 ff. roughly 86 per cent of the portfolio. the respective state governments. The promotional banks can also be contacted about promotional issues in the federal states: they support their clients with regard to promotion With a Common Equity Tier 1 capital ratio of around 12 per cent (as at 31.12.2017 ) just now, and provide help in applying for programmes. NORD/LB is on a sure footing – significantly above the current regulatory requirement of approximately 9.5 per cent. At the same time, we are also familiar with the constant momentum of the market. The growing regulatory requirements in particular have an impact on our business and risk strategy. This is why we consistently strengthen our capital ratio. 20 / What makes us who we are // How we earn our money What makes us who we are // How we earn our money / 21

At home in multiple markets Focusing on the customer

Broadly based – highly specialised Today, NORD/LB is a highly specialised all- We aim to be a quality and market leader. interests of our customers is demonstrated rounder – with products and services rang- This objective can only be achieved through by our decision not to pay our employees In the course of our more than 250-year ing from simple current accounts for private satisfied customers. So focusing on custom- sales commissions. history we have always aligned our products customers to complex transactions for com- ers is essential for NORD/LB. We pursue a and services to the needs of people and mar- panies around the world. We focus on the holistic approach that emphasises the In order to ensure that our offerings fully kets and continuously expanded them. client, which is why our seven business seg- needs of customers in all respects and meet the needs of our customers, we con- We have reached new clients and built up ments also represent our key client groups. places them at the centre of all that we do. duct surveys every two years – online and comprehensive expertise in forward-facing The current index value for We utilise a sophisticated advisory concept by phone. To be able to measure customer segments such as renewable energies. customer loyalty is to find the right financial strategies and satisfaction objectively, we take the results solutions – allowing us to serve as the and calculate an index on a scale of 0 to 100. 90 – well above the bespoke tailor for our customers. This figure allows us to compare individual minimum value of 80 specified by the Group. The factors Group companies as well as results from included in customer loyalty Our goal is always to develop a long-term previous years. The internal benchmark at are consistency, referrals and relationship. So, we are always at your side, NORD/LB is an index value of at least 80. re-election. backed by our extensive network. The fact that we are concerned exclusively with the

Business segments at a glance

Private and Commercial Energy and Real Estate Banking Customers Corporate Customers Markets Infrastructure Customers Ship Customers Aircraft Customers Customers

// Private customer business // Corporate customer // Business with // Renewable energy finance // Ship finance // Aircraft finance // Commercial real estate // Private Banking business Institutional customers // Infrastructure finance // Container Vessels // Narrowbodies finance // Commercial customer // Agricultural Banking // Savings banks/financial // Leasing // Bulker // Widebodies // Social care property finance institutions business // Finance with public and // Tanker // Freighters cooperative housing // Public-sector customers // Insurance services for // Multi-Purpose // Regional Jets private customers in cooper- associations // Municipal customers // Offshore Oil & Gas // Turboprops ation with public insurances // Syndication business with in Lower Saxony associated savings banks // Cruise/Ferries // Helicopter // Corporate Finance // Spare Engines // Finance and Operating Lease 22 / What makes us who we are // How we run our bank What makes us who we are // How we run our bank / 23

How we run our bank

Global positioning – Northern German focus The bank for SMEs

For us, north is not just a point on the compass, but a mindset. Our roots are in Lower We understand the people in our home region, and we know what moves them. After all, Saxony; over the course of our history, Saxony-Anhalt has become a second home for us. we have been at their side for more than 250 years. In particular, we have traditionally With strong regional ties to its headquarters in Hanover, Braunschweig and Magdeburg, focused on advising and supporting small and medium-sized companies. We have always NORD/LB is now a global bank: Thanks to our branches and representative offices we are viewed ourselves as a modern bank for SMEs, one that aims to be a reliable partner for our represented in key trading centres, such as London, New York, Shanghai and Singapore. corporate customers in all economic sectors and to help them ensure continuity and pre- In this way, we combine our international presence – which allows us to be where our cus- dictability in times of rapid market changes. And we also want to be there for them when tomers are – with a Northern German focus. We adhere to a set of shared values. These val- the road gets rocky. ues form the basis of our business – no matter where in the world customers and partners of NORD/LB may be located.

Milestones in NORD/LB history

1765 1933 1970 1983 1992 2008 2017 Duke Charles I of Niedersächsische Landes- On 1 July, NORD/LB takes over Bremer Landesbank becomes In the wake of German Braunschweigische Landes- NORD/LB is the sole owner Braunschweig-Lüneburg bank-Girozentrale is formed the business of Norddeutsche part of NORD/LB Group. reunification, NORD/LB sparkasse commences opera- of Bremer Landesbank (BLB), founds the Herzogliches as a result of the merger of Landesbank – Girozentrale. It becomes the Landesbank tions as an institution of with 100 per cent of its share Leyhaus, the foundation of Girozentrale Hannover and is created by the merger of the and central clearing house for NORD/LB with partial legal capital. The merger is com- today’s NORD/LB. the former Landesbank der four predecessor institutions: savings banks in Saxony- capacity. pleted on 31 August. Provinz Hannover. Niedersächsische Landes- Anhalt and for a time also in bank-Girozentrale, Braun- Mecklenburg-Western Pomer- schweigische Staatsbank, ania. Another regional head- Hannoversche Landeskreditan- quarter for NORD/LB is stalt and Niedersächsische opened in Magdeburg. A detailed history can be Wohnungskreditanstalt. Braun- found on our website: schweigische Landesspar- www.nordlb.com/nordlb/ kasse (BLSK) continues to about-us/history operate as a special division of NORD/LB. 24 / What makes us who we are // How we run our bank What makes us who we are // How we prepare our bank for the future / 25

How we prepare our bank for the future

The NORD/LB management team

Decisively meeting challenges – with the right strategy

There is no downtime in our market environment – whether it is because of regulations or low interest rates, the willingness and ability to change is needed now more than ever. With our diversified and flexible business model, we have a lready positioned ourselves well in recent years. But increasingly complex external and internal challenges require more comprehensive measures than ever before. We are meeting these challenges on our own terms – with “ONE BANK”: this Group-wide transformation programme will change and improve NORD/LB substantially.

Future prospects based on three pillars: “ONE BANK”

We want to use the There is a clear aim behind this programme: we want to create lasting added value for “ONE BANK” programme our owners, customers and employees. In order to increase our resilience in times of crisis to save and remain competitive and profitable on the market in the long term, we need lean € 200 structures and efficient processes. To this end, we are adapting our business model, Group structure and operating model. We have defined ambitious target figures for each of these three pillars. million Managing Board (left to right) by 2020.

Günter Tallner Christoph Dieng Thomas Bürkle Member of the Member of the Chairman of the Management Board Management Board Management Board A sustainable added value for our owners Ulrike Brouzi Dr. Hinrich Holm Christoph Schulz Member of the Deputy Chairman of the Member of the Management Board Management Board Management Board The responsibilities of the Managing Board and a ONE BANK detailed overview of the Supervisory Board with 15 more members online at Business model Group structure Operating model www.nordlb.com/nordlb/ Supervisory Board about-us/committees-and- Focus on core business Simplification of the Group Enhancing the operating executive-bodies/ Chairman 1st Deputy Chairman 2nd Deputy Chairman segments, portfolio structure, just as started model and significant reduction in Shipping with full integration of improving of the bank’s Reinhold Hilbers Thomas Mang André Schröder Customers’ segment Bremer Landesbank efficiency Minister of Finance President Savings Banks Minister of Finance State of Lower Saxony Association of Lower Saxony State of Saxony-Anhalt 26 / What makes us who we are // How we prepare our bank for the future What makes us who we are // How we prepare our bank for the future / 27

Our transformation programme “ONE BANK” Building the bank of tomorrow today

// We intend to expand our strong position in our core business segments and continue to What will financial institutions look like in the future? Business model take advantage of this position to achieve high-quality growth – especially with corporate and private customers. We have been looking at this question as part of our digitalisation strategy. Giving // We operate on the market with a clear, strict NORD/LB a greater digital focus means that, first, we must reposition our complex IT Sound CET1 focus, thus strengthening our Group-wide infrastructure. Aside from our own processes, we must also focus on customers: what will capital base > 13 per cent sales model. they expect from their bank in the future? What products and services can we offer to meet // We continue to consistently reduce our their expectations? shipping loan portfolio. Sustainable Revenue level at // Ship financing remains a strategic core earnings roughly €2 bn business of NORD/LB – with a significantly iLab: our R&D department diversified and conservatively structured portfolio. In order to find out, we created the iLab, an agile development and test environment for innovations. Separated from daily banking operations, the iLab experiments with new tech- // The integration of Bremer Landesbank (BLB) was the first step of the "ONE BANK" transfor- nologies and reviews new trends, such as big data and blockchain, to determine if they are Group structure mation programme. We show, i.a., how inexio ena- viable and practical. The aim is to take the solutions developed in our “innovation lab” and bles telecommunication for // This provides considerable synergies with the next generation. Please put them into practice in our business segments and thus offer them to our customers. respect to structures, decision-making paths find more by following this link: and cost reduction potential. www.nordlb.com/corpo- Higher Cost-income ratio Partnerships with fintechs // In addition, we are subjecting the Group’s rate-customers/corporate- efficiency < 50 per cent overall structure to a critical review. customers/ // As part of the integration of BLB, all business Keeping up with trends is essential in the digital age. Doing so involves a change in segments will be reorganised and managed culture, which requires openness and new skills as well as an expansion of our horizons. Cost Target of BLB centrally from the Hanover and Bremen synergies merger up to € 80m locations. And ideas from outside the bank, such as from fintechs, are also welcome in this regard. NORD/LB has established a joint venture, which allows it to participate in start-ups, especially financial solutions and infrastructure themes. This provides it with the opportunity to form product development synergies with young companies and expand our offer- // We are reviewing our Group-wide operating model with the aim of achieving significant, ing in a targeted manner. Operating model cost-effective efficiency improvements. // Here, we would like to highlight organisational aspects in particular: where can processes be streamlined, where can administrative €150-200m Cost reduction expenses be reduced? (incl. synergies of until the end // We have already focused on a number of BLB merger) of 2020 action areas, such as the optimisation of the credit and security processes, and the align- Administrative Target level ment and positioning of subsidiaries and expenses < € 1 bn locations in accordance with the principle of the non-overlapping bank. 28 / What makes us who we are // How we conduct our business What makes us who we are // How we conduct our business / 29

How we conduct our business

How our stakeholder dialogue works

A clear code of conduct for everyone at the bank

The trust of our customers and business partners as well as our own reputation are crucial for NORD/LB – not least for the bank’s financial success. Strict compliance with laws and regulations is essential, as is impeccable ethical behaviour. That’s why NORD/LB has developed Investors The complete NORD/LB its Code of Conduct, the company’s internal “basic law”. The Managing Board of NORD/LB Code of Conduct online at // Investor Relations requires all employees to be 100 per cent compliant. What this exactly means is defined in www.nordlb.lu/page/docMan- // Trade fairs, customer events e. g. ager/docs/348/Code_of_Con- the Code of Conduct and by the ethical principles for honest, value-conscious and fair beha- Employees concerning sustainable investments Customers duct_02_2017_EN.pdf viour at NORD/LB. They contain clear obligations, including the obligation to avoid conflicts // Staff portal and magazine // Business reports // Customer magazin 52°, newsletter, magazine, information brochures, etc. of interest, to combat corruption, and to prevent money laundering and the financing of ter- // Dialogue with staff representatives and senior management // Customer satisfaction surveys rorism. As important tools in our corporate management system, these codes of conduct are // Staff magazine 361° // Customer events, trade fairs binding for members of the Managing Board, members of management and staff alike. // Pensioner events

Open dialogue with our stakeholders Press and media // Press releases, press conferences, Regional bank, clearing house, public-law institution, diversified ownership structure, Suppliers and business partners NORD/LB’s press meetings major employer, promoter of the regional economy: NORD/LB stands at the centre of society // Supplier management meetings // Publications on individual topics Stakeholder and has a broad impact on it. So we have a large number of stakeholders. The needs and // Joint activities opinions of our stakeholders are valuable to us – especially with regard to our sustainability Dialogue strategy. For this reason, it is very important for us to engage in an intensive dialogue about Shareholders Non-governmental organisation current issues and trends, such as digitalisation, demographic change, climate change and // Ongoing owner communication // Dialogue with NGOs on selected topics energy efficiency. Doing so provides us with useful insights and helps us to continuously // Events // Reply to enquires develop in line with our corporate social responsibility. We use a variety of methods to com- // Committee meetings municate with our various stakeholders, including press releases, events, professional con-

ferences, magazines, newsletters, employee portals and social media. Local community and associations Potential staff // Meetings and activities with // Social media public-sector customers // Cooperations with schools, graduate // Preperation and sponsorship of fairs, etc. studies and strategy papers Voluntarily committed // Information brochures / magazine // Sponsorship of art, culture, science, NORD/LB's declaration con- NORD/LB works hard to be a reliable and trustworthy partner in all its business activities. sport and social projects cerning the German Corpo- This includes transparent corporate management. To underscore this aspiration, we view our- rate Governance Code is selves as voluntarily committed to adhering to the recommendations and proposals set out online available by following in the German Corporate Governance Code. This code contains nationally and internationally this link: www.nordlb.com/ legal-information/legal-noti- recognised standards for good and trustworthy corporate management. ces/corporate-governance/ 30 / What makes us who we are // How we align economic success and corporate responsibility What makes us who we are // How we align economic success and corporate responsibility / 31

How we align success and responsibility

Key factors for ensuring competitiveness and future viability

Sustainable thought and action is one, if not // As a corporate value, sustainability is the most important factor for the long-term established organisationally at the senior success of companies. This is especially true management level. for NORD/LB, with its public mandate. By making sustainability a key element of our // Sustainability Management is a key core business we are not only contributing function, operating on both a professional to our own competitiveness and future via- and strategic level as well as internally bility, but also that of our customers and and externally. business partners as well as our home Corporate Sustainability Strategy 2020 region. // We developed our “Group Sustainability Strategy 2020” to integrate aspects of We aim to achieve these core objectives in the five major sustainability areas by 2020: Important aspects of the regional economy sustainability in all relevant business in Lower Saxony and Saxony-Anhalt, such activities. Governance Society as ship and aircraft construction, renewable // Continue to structurally reinforce our // Step up commitment to social projects energies, agriculture, housing and strong // To deal with environmental and social management approach to sustainability // Promote art, culture and science in our small and medium-sized businesses are governance (ESG) risks, NORD/LB has // Continuously review and adapt strategic core regions closely interwoven with the NORD/LB busi- developed guidelines that govern envi- sustainability focus // Ensure environmental and social ness model, which focuses precisely on ronmental, ecological and social aspects // Maintain stakeholder dialogue standards for suppliers and service these areas. For this reason, sustainability is of its business activities, enabling it to providers in line with the ten principles the highest priority for NORD/LB and is part manage its portfolio holistically. Customers of the UN Global Compact of its strategic focus. // Improve the competitive position of // We are committed to the ten principles customers and strengthen the risk Environment of the UN Global Compact as well as other position of the NORD/LB Group through // Consistently increase the Group’s major sustainability agreements. economic, ecological and social aspects environmental efficiency by reducing the use of resources, saving energy and Employees cutting back on emissions – with a focus on energy efficiency // Support the professional and personal development of employees // Promote corporate sustainability through information and training offerings 32 / What makes us who we are // How we align economic success and corporate responsibility What makes us who we are // How we align economic success and corporate responsibility / 33

Every contribution counts »We go where the people are«

We set up our Group environmental management system back in 1991. This system is A conversation with Michaela Stamme and Anke Blome from the used to record, manage and assess all activities, from purchasing to energy procurement NORD/LB Cultural Foundation. and mobility to recycling. This allows us to initiate targeted measures to constantly improve More information on our the environmental balance sheet of NORD/LB. Hanover had poetry slam fever in autumn 2017. You mean the foundation supports projects environmental manage- The NORD/LB Cultural Foundation played a outside of the mainstream? ment system online at www.nordlb.com/nordlb/ Over the past few years, we have focused in particular on the energy efficiency of buildings, role in that, didn’t it? sustainability/environment/ the efficient use of paper and water and preventing and recycling waste. But the Group Anke Blome / This is actually an essential environmental management is a continuous process that constantly offers new potential “We don’t want to be a Michaela Stamme / Yes, we sponsored the aspect of what we do. We want to interact static foundation – we for optimisation and savings. We want to take advantage of this potential in a systematic German-language Poetry Slam Champion- with as many target groups as possible, want to stay in step with manner. our surroundings.” ships – the largest live literature festival in especially young ones, to go where the peo- Europe. This is a good example of how the ple are. That’s why our commitment is so foundation tackles social issues and cul- broad. We support 40 to 50 projects per year. tural trends. We don’t want to be a static These include all sorts of projects, from Regional partner foundation – we want to stay in step with visual arts to photography, design and our surroundings. And that often leads us to music as well as theatre and literature. The area where our corporate headquarters are located is more than just a place to us: it is niche aspects of culture. where many of our customers, staff and potential future employees live and work. As a Can you give an example? regional bank, supporting the regional economy and infrastructure is very important to us –

and we also promote educational opportunities as well as social, scientific and cultural pro- Anke Blome and Michaela Anke Blome / The big successes in 2017 were jects. We do all of this out of a sense of conviction that we want to do our part to make the Stamme also support cultural the “Made in Germany” exhibit in Hanover projects at NORD/LB Cultural region attractive and liveable. Foundation. and the Kurt Weill festival in Saxony-Anhalt. The Bauhaus centennial is coming up in 2019, and we will be participating in the cel- Out of conviction ebrations in Dessau and Bremen.

Michaela Stamme / Some of the music projects we support include “Women in Jazz” // Partner to businesses and municipalities as The NORD/LB Cultural Foundation a promoter of the arts, culture and science in Halle and the Mecklenburg-Western // Supporter of social projects Pomerania Festival. We also support the // Donor and sponsor // Established in November 2012 Worpswede artist colony, the Neo Rauch // Staff volunteer work // Financed by the proceeds from the sale of the Jeff Koons sculpture “Tulips” Graphic Works Foundation in Aschersleben // The purpose of the foundation is to provide moral and financial support for and much, much more. The list of amazing art and culture in NORD/LB’s core regions projects is almost endless. // It focuses on a wide range of projects and art forms and has an educational mission as well 34 / What makes us who we are // Who makes our bank successful What makes us who we are // Who makes our bank successful / 35

Who makes our bank successful

Cornerstones of collaboration

6 453 faces – one NORD/LB The bank offers flexibility – employees decide how to utilise it in carrying out their duties. This is the cooperative principle we operate by at NORD/LB. It is a give and take in a positive Our employees are the heart of NORD/LB. With their skills and their commitment, they have sense: we provide opportunities, promote employees and help them achieve their goals. In 6 453 created the conditions for our current and future success. They provide the bank with its return, our employees offer superior performance, organise their work and act responsibly. distinct identity – after all, it is the “NORD/LB team” that serves as the direct line to the mar- people were employed by the NORD/LB Group in 2017. kets. That develops innovative and practical solutions in a dialogue with customers and business partners. That turns its ideas into reality. The basis of a successful corporate culture

We are an important employer in our regions. At our headquarters in Hanover we are Collaboration at NORD/LB is based on mutual respect and a common understanding of among the top 10 employers in terms of the number of employees. Our global and open focus is also reflected within the Group: Diverse teams work together in different locations // a value-conscious corporate culture, // leadership skills and a willingness to change, and countries, staying in close contact to learn with and from one another. And professional // a results-oriented approach to working on behalf of customers, 48.7 % diversity is also important at NORD/LB. For our broad-based portfolio we need people who // career opportunities that can be individually tailored and of employees are women. have extensive expertise in our special fields as well as management skills and who enjoy // transparent and performance-based compensation. working with our customers. We ensure that we have such people among our ranks both today and tomorrow by pursuing a modern human resources strategy.

36 Family-friendly employer We not only expect flexibility from our employees – as an employer, we also implement var- nations: at NORD/LB, we have a culturally diverse group of ious measures to ensure that our employees can strike a good balance between work and employees. This also demon- family. These measures include, for example, home offices, flexitime and part-time working strates our commitment to the models, childcare services during school holidays and providing support when an emplo- principles of the Diversity Charter. yee needs to care for a family member. Our commitment has already won numerous awards, including one from “Eltern” family magazine as well as the “Best Company for Fam- ilies” award from the “Statista” online portal.

We also actively help our employees to stay fit and healthy. Our company health management programme includes health checks, annual flu shots and fitness as well as stress management classes. 36 / What makes us who we are // Who makes our bank successful / 37

Training and development: investing in our future

We have traditionally taken our social mission as a training provider and talent developer very seriously. In times of demographic change, finding and retaining qualified employees has become even more important. We know that companies like us wanting to have the best More on our career staff on board must be attractive for them. That’s why quality is the top requirement of train- possibilities online at ing and development at NORD/LB. www.nordlb.com/nordlb/ career/ Young people start their career with us by completing an apprenticeship, a dual study programme, a trainee programme or an internship. We also work with colleges. Our training programme is unique in the industry and in addition to professional skills also includes personal coaching, mentor support and individual offerings, such as test preparation. In this way, we set the course for a long-term collaboration. This is also underscored by our rather high retention rate for young employees.

Learning is an important topic for our employees throughout their careers. An extensive range of training and development offerings provides them with the opportunity to keep their knowledge up to date. In order to be able to fill the highest levels of management from our own ranks, we have established special competence models and development programmes.

Apprenticeships Dual study programmes

// Bank clerk // Bachelor of Arts // IT specialist (business administration) // IT management assistant // Bachelor of Science (information management) // Office management assistant // Cook What the figures say

// Summary of business performance – p. 38 // Development business segments – p. 42 // Facts & Figures – p. 57 38 / What the figures say // Summary of business performance What the figures say // Summary of business performance / 39

Return to profits – with stronger equity capital

NORD/LB has formulated four key objectives for the 2017 financial year: Return to Risk assets reduced in a targeted manner profits, increase its Tier 1 capital ratio to over 11 per cent, continue to reduce its ship portfolio and implement the first milestones in its “ONE BANK” transformation programme. To understand the performance of the bank as a whole, it is worth taking a look at the Its balance sheet as at 31 December 2017 was very positive – with all objectives achieved: overall picture of the past ten years. While the public has mostly focused on the difficulties in the Ship segment, in addition to our enormous efforts in this area we have also worked // the annual results show that we have achieved a turnaround, going from a loss of See details regarding intensively on our other key figures and reduced risks in a targeted manner. For example, ships on p. 50 / 51. about € 2 billion in 2016 to a profit of € 135 million. by actively managing our risk-weighted assets (RWA), we have cut our total risk exposure // The common equity Tier 1 capital ratio of around 12 per cent above plan and well almost in half since the end of 2008. We have increased the bank’s profitability by pushing above regulatory requirements. our cost-income ratio below 50 per cent – making us a cost leader in Germany. And we have // The reduction of the ship portfolio is being achieved much faster than planned. increased our equity ratio from about 8 per cent to more than 12 per cent using our own The measures continue unabated – with a sharp focus on reducing the share of NPL, resources. which are the loans in the highest risk class. // With the integration of Bremer Landesbank, “ONE BANK” has gotten off to a successful Another important component of our equity management efforts were the successful start, and other initiatives to reduce costs and identify potential revenue are ongoing. placements in 2017. Particularly worth noting in this connection is the large-volume “Northvest 2” loan portfolio transaction, which enabled us to reduce our risk assets by about € 3.7 billion.

Savings Banks Network: a separate business segment starting in 2018

During times of dynamic changes, NORD/LB needs to have an agile and efficient organisa- € 135 million € 46.9 billion tion in order to be able to respond quickly and flexibly on the market. That is why we are Consolidated profit Total risk exposure amount See details regarding using the “ONE BANK” programme to review structures and processes throughout the “ONE BANK” on p. 2 / 3 and p. 26 / 27. Group and adapting our business model in line with our needs. One example of this is the network business with savings banks in Lower Saxony, Saxony-Anhalt and Mecklenburg- € 5 696 million 12.2 % Western Pomerania as well as Schleswig-Holstein in an expanded network. Equity Equity ratio Savings banks are very important to us as institutional customers, as market access to a broad customer base and as partners. Conversely, we are an important and strategic market 51.4 % € 4.8 billion partner and provider of products and processes for savings banks. We want to strengthen this collaboration and expand the network business as a driver of NORD/LB’s values. To this Cost income ratio Ship portfolio reduction end, we are combining our various network activities into a centrally managed area: starting in 2018, the “Savings Banks Network” segment will be a separate business segment within our business model, making it the eighth such segment. Within this segment, we will 3.4 % carry out our defined strategic priorities related to our clearing house function, corporate Return on Equity customers, syndication activities, the sale of capital market products and the municipal loan business. 40 / What the figures say // Summary of business performance What the figures say // Summary of business performance / 41

»In essence, it’s about having foresight and the ability to adapt for the future«

The “ONE BANK” transformation programme What challenges does the future present? was a constant issue for NORD/LB throughout the year. How much has this programme chan- Dr. Hinrich Holm / We face many challenges, ged the bank already? such as the implementation of new regulatory requirements like IFRS 9 or Basel IV Dr. Hinrich Holm / We are well on our way as well as the successful conclusion of the 12.2 % and have already accomplished much – EU-wide stress tests in 2018. But aside from both major changes, such as the merger regulatory issues, there are also market For a bank, this CET1 quote is an important figure – in 2017, with Bremer Landesbank, and smaller initi- changes such as digitalisation, which poses we achieved to increase it by atives that only affect individual depart- significant challenges for the entire banking four per cent. ments or processes. As a highly complex industry and will change it over the long programme, “ONE BANK” is an ongoing term. process. The programme was a continuous topic for us in 2017, and it will remain so Finally, let’s take a brief look ahead: What goals over the next few years. has NORD/LB set for itself in 2018?

What do employees think of this far-reaching Dr. Hinrich Holm / Strengthening our capital programme? ratios remains our top priority, as supervisory requirements will continue to increase. Dr. Hinrich Holm / If we take a look at indi- The “ONE BANK” programme should make Dr. Hinrich Holm How satisfied are you with the performance Which factors were decisive for this success? vidual target figures and initiatives, we see the bank even more profitable. In the Ship Deputy Chairman, responsible of NORD/LB in 2017? that in essence, “ONE BANK” is about segment, the path we have embarked on has for the bank’s capital market business. Dr. Hinrich Holm / We took some important having foresight and the ability to adapt for proven to be very successful, and we will Dr. Hinrich Holm / Very satisfied. We wanted steps beginning in 2016, especially with our the future. The bank is currently well posi- continue this course with a focus on conti- to have positive annual results again, comprehensive package of measures in the tioned, but we must take steps now to pre- nuously reducing the portfolio. improve our capital ratios and reduce our Ship segment. Our plan to change course pare for future challenges – anything else ship portfolio. We have managed to do all of using our own resources and be in the black would be irresponsible to our shareholders, this. again by 2017 worked. We also benefited investors, customers and, not least, our here from the broad diversification of our employees. The changes are necessary – our business model. Apart from the Ship seg- employees know this and they are actively ment, all of our other business segments are helping to implement the programme. once again profitable and, despite increa- sing competition, they have managed to stay level or improve. 42 / What the figures say // Development business segments What the figures say // Development business segments / 43

A tradition of proximity to our customers

Private and business customers Brief profile of the business segment // A tradition of more than 250 years and an extensive network of almost 100 locations // Private customer business // Private banking // Commercial customer business throughout the Braunschweig region // Insurance benefits for private customers // An offering of need-based advisory (online and by phone via BLSK.direkt) and selected products and services for all private and Earnings before taxes slightly improved despite the sale of NORD/LB Wealth Manage- commercial customers in the Braun- ment Luxembourg. Former Bremer Landesbank's private banking was fully integrated. schweigische Landessparkasse (BLSK) business region, in Hanover and Hamburg, Furthermore we focussed on expending the online activities and implementing a new and in Bremen and Oldenburg digitalisation strategy. // Inheritance and foundation management, portfolio management and individual asset management in the private banking segment of NORD/LB and BLSK // Strong with partners like Öffentliche € 7.8 billion Versicherung Braunschweig, LBS Nord € 221 million (building society), Deka, Deutsche Leasing, Exposure Earnings S-Kreditpartner and the Versicherungsgruppe Hannover (insurance companies)

“Excellent asset manager” – for the 14th year in a row

Once a year, “Elite Report” and the “Handelsblatt” newspaper name the best asset managers € 174 million in German-speaking countries. During their stringent review, they analyse a total of 40 Expenses € 47 million Operative earnings parameters, including performance, value retention and resistance against fluctuations in value. Each year, only around a tenth of the 350 or so candidates earn a distinction. At the end of 2017, Bremer Landesbank (BLB) – which is now part of NORD/LB – received the cov- eted title of “Excellent asset manager” for the 14th year in a row.

€ -3 million “Its systematic advisory process provides the bank’s asset management services with well € 50 million thought-out guidelines that offer impressive results. Throughout northern Germany, the Earnings before taxes Loan loss provisions bank’s asset management services serve as the measure of success for its customers.” The jury’s judgement confirms our strategy, which is based on an active understanding of our customers and defensive asset management. In this way, Private Banking constantly creates added value for customers’ assets, despite negative conditions, such as economic crises, 78.8 % zero interest rates and inflation. Cost Income Ratio Whereas business volume remained unchanged, earnings before taxes rose slightly. 44 / What the figures say // Development business segments What the figures say // Development business segments / 45

Regional focus and a high level of industry expertise

Corporate customers Brief profile of the business segment // Stable business development with existing and new customers in the corporate // Corporate customers // Agricultural banking // Housing customer segment // Savings bank syndication business // Corporate finance // Tailor-made financial solutions for SMEs – partly in close cooperation with the Savings Banks In a competitive market environment we were able to expand our business thanks to the // Strong position and high competence in tailor-made approach, especially in issuing promissory notes and in the field of domestic acquisition finance business confirmed social housing. // Extended market position as an important financer in the field of agricultural banking // Successful marketing of asset- and structuring expertise in public housing segment // Successful strategic positioning with customers together with corporate finance (e.g. asset-liability management, capital-market € 28.5 billion € 443 million financing, working-capital management and Exposure Earnings purchasing receivables)

At home wherever in the world our customers are located

Many of our customers are expanding their business activities to Asian countries with € 170 million strong growth rates. As a leading German regional bank, NORD/LB is also present in local Expenses € 273 million Operative earnings Asian markets where we are needed. The Singapore branch with its 80 employees is our References, case studies competence centre for credit and financing in the Asia Pacific. The “German Desk” offers and more information on our corporate customers our German small and medium-sized business customers a personal point of contact. online at www.nordlb.com/ corporate-customers/ What moves the SME sector? € 30 million corporate-customers/ € 243 million Since 2010, NORD/LB has reported on news and trends of special interest to small and Earnings before taxes Loan loss provisions medium-sized business in “52° NORD”, its magazine. The magazine highlights various sectors, markets and regions and shares the interesting thoughts of a range of different people. We provide specific solutions for our small and medium-sized business customers under “References” in the corporate customer section of the NORD/LB website. 38.3 % Cost Income Ratio Earnings before taxes rose by 21.5 per cent compared to the previous year. 46 / What the figures say // Development business segments What the figures say // Development business segments / 47

In a strong position thanks to successful issues

Markets Brief profile of the business segment // Issuer of Pfandbriefe (public-sector, mortgage, ship, aircraft), lettres de gage (“Pfand- Business with: // Institutional customers // Savings banks // Financial institutions briefe” issued under Luxembourg law), bearer // Public-sector customers // Municipal customers bonds, promissory notes, money market instruments // Successful positioning as lead manager/ In line with the expansion of Debt Capital Markets for financial institutions and public issu- arranger for the placement of bond issues, in ers numerous new lead mandates were gained. 2016 higher profit was caused by an one-off particular covered bonds // Comprehensive and tailored range of money effect (sale of custodian business). and capital market products in the private placement segment // International funding programme: medium term € 25 billion (MTN), terms of <2 years totalling around € 17 billion roughly € 6 billion // In 2017, a total of € 29.1 billion in securities at € 318 million the NORD/LB Group that are eligible for ECB benchmark issues within or Federal Reserve NORD/LB Group Earnings

One of the premier addresses for covered bonds worldwide

Within the Markets business segment, we strategically expanded the Debt Capital Markets € 138 million segment for financial institutions and public issuers in 2017. In this context, we were again Expenses € 180 million Operative earnings able to acquire a significant number of new issuers for lead mandates.

Our business activities focused primarily on the market for euro-covered bonds, once again achieving the top 15 positions in the Global League Tables, a global issuance ranking. NORD/LB thus remains one of the most successful placement banks for covered bonds € 181 million € -1 million worldwide. Earnings before taxes Loan loss provisions In comparison to the issues of the German federal states, NORD/LB again ranked among the top five in the Global League Tables for the first time since 2015. We ended 2017 in fourth place as the most successful federal state bank in this segment.

43.4 % Profit from regular business Cost Income Ratio activities (without one-off effect) remained on a solid base this year. 48 / What the figures say // Development business segments What the figures say // Development business segments / 49

Leading financier for innovative projects

Energy and Infrastructure Customers Brief profile of the business segment // Expansion and consolidation of the market position through long-term expertise and // Financing for renewable energy // Infrastructure financing // Leasing customer-oriented structuring in project financing of renewable energies // Focus on energy generation from wind In a competitive environment we were able to maintain one of the leading financers of (roughly 80 per cent), solar and biogas: renewable energies in our European core markets and expanded worldwide business. leading financier in the European core markets of Germany, France, Ireland and the UK; expansion of customer base in North America and Asia in the energy sector // In terms of social infrastructure projects focus on education, housing, blue light and logistics/ transport; public finance initiative/public private partnership business together with the public sector € 19.4 billion // For more than 25 years one of the leading € 227 million financiers in Germany’s leasing sector Exposure Earnings

New campus for the Cumbernauld high school

Modern learning in Cumbernauld: NORD/LB is financing a school campus in this city in € 107 million the Scottish district of North Lanarkshire. In addition to the school building itself, sports Expenses € 170 million Operative earnings and parking areas, green spaces and a theatre are being built on the grounds. The extensive In 2017, the infrastructure construction project with a total investment volume of just under GBP 37 million (approxi- team at NORD/LB received the mately € 41 million) is scheduled for completion in 2021. In return for the provision of the Gold Award of the Partnership Awards in the category of buildings, the company established for project financing (SPV) receives annual payments “Debt Provider of the year”. from the municipality and bears no volume or utilisation risk. More information at € 36 million www.nordlb.com/structured- € 134 million finance/infrastructure/ Financing for the Detern community-owned wind farm Earnings before taxes Loan loss provisions expertise/

In the district of Leer in the state of Lower Saxony, our customer Innovent Planungs GmbH & Co. KG is developing the Detern wind farm with six wind turbines. NORD/LB is providing € 38.5 million in debt capital for the project. After the wind farm becomes operational, it will Due to the ongoing low inter- not just be part of the municipality geographically speaking: citizens have the opportunity est-rate levels net interest to participate in the project – a concept that significantly increases the acceptance of wind income fell in 2017 compared to 38.6 % record year 2016. The cost-in- Cost Income Ratio energy by the local population. come ratio continued to be significantly better than in the bank's average business. 50 / What the figures say // Development business segments What the figures say // Development business segments / 51

On course to calmer waters

Ship Customers Brief profile of the business segment // Great progress in the reduction of our ship portfolio: in 2017, the portfolio was reduced Ship financing: Container ships // Bulk carriers // Tankers // Multi-purpose // Cruises by a total of € 4.8 billion // Ferries // Special ships // Targeted reduction in challenging segments such as dry bulk and container ships – driven by, among other things, extraordinary The consolidation in the shipping markets continued in 2017. We managed to reach repayments, support for disposals and our target of € 12-14 billion for year-end 2018 even one year early. Now, we aim to further placements // Selective new business in the areas of cruises, reduce the shipping portfolio, the NPLs should comprise not more than € 5 billion. ferries and special tonnage (for example cement and asphalt carrier) // International focus with locations including Singapore and Shanghai // Further development of the business model by continuing to diversify the portfolio based € 12.1 billion € 323 million on a more balanced spread of assets and regions, and by developing and broadening Exposure Earnings the product range

Five-star plus

In 2017 NORD/LB, in a consortium with KfW IPEX, financed four “five-star plus” luxury € 117 million river cruise ships for Crystal River Cruises, a subsidiary of the Asian tourism company Expenses € 206 million Operative earnings Genting Hong Kong. River cruises are a strong trend in their own right within the booming cruise segment. With a total financing volume of € 166 million – backed by 95 per cent Hermes cover – we are assisting Genting Hong Kong in expanding its range of products in this area.

€ 946 million We have had a business relationship with the customer for more than 20 years and have € –740 million financed a total of 20 ships. The transaction underscores both our aim of expansion in the Loan loss provisions Earnings before taxes cruise segment as well as our success with our Asia strategy.

Net interest income fell due to 36.3 % the net reduction of the portfo- Cost Income Ratio lio. Future new business in other ship industries should improve future earnings again. 52 / What the figures say // Development business segments What the figures say // Development business segments / 53

Forging ahead with a first-class portfolio structure

Aircraft customers Brief profile of the business segment // Portfolio with 535 aircraft, six helicopters and four (spare) engines with very broad diversifi- Aircraft financing: // Standard narrow-body aircraft // Wide-body aircraft // Regional jets cation // Turboprops // Helicopters // Engines // Finance and Operating Lease // Limited to assets with long-term value (aircraft and engines) // Portfolio with a very high collateralisation ratio The securitisation of bigger portfolio transactions is gaining ground in this segment. (by 95 per cent) NORD/LB only partly holds the loans: Other investors step in and take over other parts // Average age of the assets approx. six years. of the loans. // Mostly Warehouse and operating- lease structures // One of the market leaders in aircraft financing: a wide range of commercial and covered financing for standard narrow-body and wide-body aircraft, regional aircraft and helicopters € 5.7 billion € 115 million // Conservative focus and high level of risk Exposure Earnings awareness as well as ensuring adequate repayment terms/financing structures

Cargo aircraft for global e-commerce

The US leasing company VX Capital is the global market leader in the leasing of aircraft that € 33 million are converted into cargo planes after their “first life” as passenger aircraft. These models Expenses € 82 million Operative earnings have to be purchased quickly so the company needed a financing solution with maximum flexibility.

NORD/LB arranged what is known as “warehouse facility” financing for VX Capital with a volume of USD 125 million. The customer receives a credit line that enables them to pur- € 2 million chase and lease aircraft and establish a portfolio with little lead time – without having to € 80 million worry about long-term financing like the competitors. In return, we will participate in the Loan loss provisions Earnings before taxes subsequent placement of the portfolio on the capital market.

The lessees of the approximately 25 aircraft financed are from all over the world. The first aircraft are already flying in Belgium, Mexico, Sweden and Iceland. They are all used to transport goods in the e-commerce growth market. As a result, we will also benefit from this megatrend in the course of this transaction. Due to the fact that NORD/LB 28.7 % only holds parts of the loans, Cost Income Ratio net interest income fell in 2017. Net commission income rose instead. 54 / What the figures say // Development business segments What the figures say // Development business segments / 55

Sustainably good performance – despite intensive competition

Real Estate Customers Brief profile of the business segment // Deutsche Hypothekenbank as a competence centre for commercial real estate financing in // Commercial real estate financing // Community real estate financing the NORD/LB Group, support for the German housing industry by NORD/LB in Magdeburg // Financing mainly of office and commercial In a challenging environment we achieved a new business volume on high level in this busi- buildings, shopping centres, hotels, logistics ness segment, dominated by Deutsche Hypo, again. We hold on to our conservative risk pol- buildings and multi-storey residential icy and our high standards of quality for new business. In 2017, we were able to close a lot of buildings in preferred metropolitan areas // Financing concentrates on Europe with focus new attractive deals again. on Germany; financing of commercial real estate in UK, France, Benelux, Spain and Poland // Financing of international community real estate // Successful strategic cooperation with pension € 15.8 billion € 212 million funds as a partner for large-volume financing Exposure Earnings

Modern industrial park behind a historical facade

In 2017, Deutsche Hypo financed the industrial park “Phoenixhof” for the Essen Group: € 63 million The factory site in Hamburg-Ottensen dates back to the early 20th century and today houses Expenses € 149 million Operative earnings offices, retail shops, restaurants and a television studio. The financing volume was a total of € 44 million. In addition to the financing of the existing portfolio, two further office properties will be built as part of the project development. As a result, the leasable area increases to more than 20 000 square meters. € 153 million € – 4 million Deutsche Hypo’s first green mortgage bond Loan loss provisions Earnings before taxes At the end of 2017 Deutsche Hypo issued its first green mortgage Pfandbrief. It is the second bank in Germany to successfully place a green Pfandbrief in benchmark format on the capital market. The six-year issue has a volume of € 500 million. It combines the quality product

Domestic social housing busi- Pfandbrief with the financing of exclusively energy-efficient real estate – and is thus an ness of former Bremer Landes- ideal fit for our sustainability strategy. bank is now being part of Cor- porate Customers segment 29.8 % instead of Real Estate Banking Cost Income Ratio Customers. Standard business remained unchanged in this segment. 56 / Imprint

Imprint:

NORD/LB Norddeutsche Landesbank Girozentrale Friedrichswall 10 30159 Hanover, Germany Phone: +49 (0) 511 / 361-0 Fax: +49 (0) 511 / 361-2502 www.nordlb.com

Concept, realisation and composition: HGB Hamburger Geschäftsberichte GmbH & Co. KG, Hamburg

Photography: Crystal Cruises, Los Angeles (Page 51) Edify Energy, Queensland (Page 6) HUB South West Scotland Limited, Irvine (Page 49) Innovent Planungs GmbH & Co. KG, Varel (Page 7) istockphoto.com (Page 10, 11, 13, 14) Michael Penner, Hamburg (Page 11) Svevind AB, Umeå (Page 13) Thinkstock (Page 55) Thomas Gasparini, Peine (Page 1, 2, 3, 4, 5, 8, 15, 16, 19, 24, 31, 33, 34, 40, 43) Thomas Schwoerer, Hamburg (Page 45, 47, 49, 53)

Illustration: Facts & Figures Klaas Horeis, Hamburg Daten & Fakten

Lithography: PX2@ Medien GmbH & Co. KG, Hamburg

Print: Geschäftsbericht 2017 gutenberg beuys feindruckerei, Langenhagen Finanzinformationen 2. Halbjahr 2018 58 /

NORD/LB Norddeutsche Landesbank Friedrichswall 10 30159 Hanover, Germany www.nordlb.com www.facebook.com/nordlb www.twitter.com/nord_lb

Status: 01/2018